On 15 April, the fourth general meeting of China Agriculture Insurance and Reinsurance Community (hereinafter referred as to “CAIRC”) and the seminar of agriculture re-insurance services was held in Beijing. Chen Wenhui, Vice-Chairman of CIRC, fully acknowledged the results achieved by CAIRC since its establishment, presented the positive development trend of agriculture insurance in PRC in present and proposed new requirements for reform of deepening the system of CAIRC in next stage.
During the first year since CAIRC has been established, under the guidance of relevant government authorities, including CIRC, MOF, MOA, etc, CAIRC actively played its role in the reform and development of agriculture insurance in the PRC. Through systemic arrangement and market marketization model, CAIRC effectively integrated the underwriting capacity among member companies, steadily broadened the demand and supply of the underwriting capacity in the industry, provided sustainable and stable protection and support for reinsurance to the industry and effectively provided support to the industry for “expanding scale, raising standards and diversifying products”, which utterly secured the stable operation of support system and safety production of agricultural industry in the PRC.
Chen Wenhui pointed out that the establishment of CAIRC was critical to the development of agriculture insurance in PRC, fully implementing the exploration and system innovation for the optimization of agriculture insurance system and establishment of catastrophe risk diversification system under the direction of the Central Party and State Council. During the year after its establishment, CAIRC steadily and rapidly developed and made positive contributions to extending the aspect of reinsurance, stabilizing reinsurance channels, supporting the development and innovation of the industry and facilitating the communication and cooperation among industry players, which basically fulfilled the initial objectives of the system.
While fully recognizing the results achieved by CAIRC since its establishment, Chen Wenhui also presented the good development trend of agriculture insurance in the PRC and in present and proposed new requirements for reform of deepening the system of CAIRC in next stage. He said that agriculture insurance is a supporting pillar of agriculture modernization, while the Central Party and State Council pay more and more attention to agriculture insurance. It is the golden age of agriculture insurance. In next stage, “extending aspect, raising standards and diversifying products” will be the focus and trough consolidating the fundamentals, extending coverage and stably raising standards, all industry players will cooperate to upgrade existing agriculture insurance for the new stage.
Chen Wenhui requested that CAIRC needs to be deeply reformed, improves innovation and facilitates each work to go into a new stage: the first step is to further optimize the operation system of CAIRC to ensure the independence and impartiality of CAIRC; the second step is to further enhance the professionalism, integrate industry resources, stably attract more participants subject, improve underwriting capacity of reinsurance and extend insurance coverage, which allows CAIRC to play a fundamental role in stabilizing agriculture insurance system; the third step is to improve data collection and pricing model, provide more support to member companies, especially for risk management, and to increase our influence and discourse power in the international market.
Jiang Caishi, Chairman of the general meeting of CAIRC, told reporters that CAIRC also serves the new agriculture operation entities, innovates insurance products and supports agriculture insurance with local characteristics by providing professional technical support. CAIRC has been cooperating with member companies to provide loan guarantee insurance in relation to agriculture industry for more than 2000 new operating entities in Anhui and Henan, to provide reinsurance support to the innovative price insurance products for hog price in major hog breeding regions, major vegetable prices, including green vegetables and garlic, in certain provinces as well as weather index. Besides, it provides reinsurance protection to more than 30 types of insurance for featured agricultural products, including Pu-erh and coffee plantation in Yunnan and marine breeding industry in Weihai, Shandong province. CAIRC now plays a more and more important role in promoting agriculture modernization insurance services.
According to the data, in 2015, area of major crops covered by agriculture insurance amounted to 1.45 billion mus, representing 59% of cultivated land for major crops in the PRC, of which more than 70% of cultivated area for growing three staple crops with 189 varieties were under insurance coverage. Agriculture insurance coverage rate in townships was 93%, and coverage rate in villages was 48%. The PRC has become the largest agriculture insurance market in Asia and the second largest in the world with increasing influence and discourse power in the international market.
At this general meeting, Mata, officer of agriculture insurance department of Insurance Compensation Consortium in Spain, shared the development history of agriculture insurance in Spain. As a major agricultural country in Europe, the Spanish government established a 4-level agricultural risk diversification mechanism, which comprises of direct insurance, reinsurance, disaster provision and contingency plan in accordance with Agriculture Insurance Act in 1978. Meanwhile, the Insurance Compensation Consortium was established in Spain to provide reinsurance protection for agriculture insurance. This mechanism has been operating for over 30 years, and is crucial facilitating agricultural production in Spain.
Li Lisong, general manager of CAIRC, was of the view that developed countries tended to establish agricultural disaster risk diversification mechanism according to their own situation. The establishment and operation of CAIRC has borrowed international experience to the actual situation in the PRC and combined with practices and innovation. CAIRC will operate with the philosophy of “Based on the Industry and Serving Agriculture” to effectively fulfill relevant objectives required by the government and strive to become a professional platform specializing in agricultural risk management and a supportive platform for agriculture insurance innovation.
In recent years, agriculture insurance in the PRC has achieved breakthrough in development with increasingly higher and more important position in the whole economy and society, and made positive contribution to preventing agriculture disaster, maintaining state food safety, increasing farmers income and agriculture transformation. According to statistics, during the period of the “Twelfth Five-year Plan”, RMB6.5 trillion accumulative risk coverage under agriculture insurance were provided to 1.04 billion farmers, and RMB91.4 billion compensation was paid to 120 million farmers in second tier. In 2015, risk protection provided by agriculture insurance was RMB1.96 trillion, representing a y-o-y increase of 20.42% and accounted for approximately 32.72% of agricultural GDP; whereas compensation expense was RMB26.008 billion, representing 9.64% of direct economic loss of crops and 7 times of State Agricultural Disaster Relief Fund. The number of pilot provinces and cities of price insurance has increased to 26 with 18 varieties under coverage. Manual intervention for weather, GPS positioning and camera recording by drones have been widely used. The State Council fully acknowledges our work in targeted poverty alleviation with agriculture, pilots for seed insurance and linkage mechanism of agriculture insurance and harmless treatment.